G-7 Will Be Overtaken by Emerging Economies in 2032, PriceWaterhouse Says

By Scott Hamilton -
Jan 6, 2011

The Group of Seven economies will be
surpassed in size by the largest emerging markets in just over
two decades as the financial crisis accelerates the shift of
power in the global economy, PricewaterhouseCoopers LLP said.

The combined gross domestic product of the seven biggest
developing economies will exceed that of the G-7, the world’s
largest industrialized markets, in 2032 using projected market
exchange rates, the company said in a report released in London
today. China will overtake the U.S. as the world’s largest
economy also in that year, it said.

Emerging markets have been leading the world out of the
recession triggered by the banking crisis in developed nations,
with China replacing Japan as the world’s second-largest economy
last year. The report adds to forecasts saying that developing
nations will propel the world economy in coming decades, driven
by growth in China and India.

“This renewed dominance of China and India, with their
much larger populations, is a return to the historical norm
prior to the Industrial Revolution of the late 18th and 19th
Centuries,” economists John Hawksworth and Anmol Tiwari said in
the report. “That caused a shift in global economic power to
Western Europe and the U.S. -- this temporary shift in power is
now going into reverse.”

Gap Narrows

In 2009, the combined GDP what PricewaterhouseCoopers calls
the Emerging Seven of China, India, Brazil, Russia, Indonesia, Mexico, and Turkey was the equivalent of 35 percent of the G-7.
By 2020, E-7 GDP will increase to about 70 percent of the G-7’s,
and by 2050 it will be 64 percent larger, according to the
report.

Also in 2032, Brazil’s economy will overtake Germany’s in
size, while India will eclipse Japan in 2028, the accountancy
firm said.

“Rapid growth in consumer markets in the major emerging
economies associated with a fast-growing middle class will
provide great new opportunities for Western companies,”
Hawksworth and Tiwari said. “Without it, Western companies will
increasingly be playing in the slow lane of history if they
continue to focus on markets in North America and Western
Europe.”

In a report last year, PricewaterhouseCoopers said the G-7
would be eclipsed in size by the “Emerging Seven” by 2020
using purchasing-power-parity-adjusted exchange rates, which
take into account price differences of the same goods between
countries. Today’s 2032 estimate uses projected market exchange
rates, which does not correct for price differences.